The company hopes the study of living organisms will also provide ways of improving the recovery of oil, as well as opening up more opportunities for coal bed methane and carbon sequestration.

Lord Browne, chief executive, said he had started talks with leading universities in Britain and the US that could host what will be known as the BP Energy Biosciences Institute. "The world needs new technologies to maintain adequate supplies of energy for the future. Bioscience is already transforming modern medicine and we believe it can bring immense benefits to the energy sector," he said.

The initiative was given a muted welcome by environmental campaign group Greenpeace, which said there were wider worries about biofuels and land use. Doug Parr, chief scientist, said: "This is good but it's not in itself any kind of answer. BP can't do everything on its own. It's up to governments and legislators. Biofuels can compete for land use against biomass and cause deforestation in areas like Brazil."

BP hopes to start early research programmes by the end of next year and will focus on developing new biofuel components and improving those currently blended with transport fuels.

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